Financially, the last couple of years of living in the Philippines has been a very interesting time. As an American, I primarily follow the exchange between the Dollar and the Peso. However, my expat friends from many other countries have gone on a roller coaster ride over the past two years or so. Over the last couple of years, the financial situation has been pretty bad for Americans with the Dollar taking a beating, but things have turned around. Over the last few weeks, I have interacted with a number of expats, and the conversations we have had have kind of made me think the whole financial situation over a little more deeply. Over the past couple of years, our friends from other parts of the world have been riding high with their currencies, but recently, many of them have been turning around, and have fallen drastically. All in all, it seems that in recent months there has been a financial flip-flop.
A few weeks ago, I got a note from a fellow in Australia. He was very, very interested in moving to the Philippines right away. He had lots and lots of questions to ask me, and I gladly answered all of them. Soon, the talk turned to the possibility that he would purchase a piece of land here, he was primarily interested in living on Samal Island, since he really enjoyed a peaceful area with plenty of quiet, beautiful scenery and a lifestyle filled with nature. He inquired through Feyma about the possibility of helping him find a place to live on Samal. After a number of communications, my new friend wrote to me and said that he had decided that the timing was not right for such a move. He lamented the current sinking of the Australian Dollar against the Peso. I went and did some looking into this, and here is what I found. Two years ago, the Australian Dollar was at a rate of about P38:AUD1. Roughly, the AUD stayed in a range of 38 to 40 until January 2008 when it dipped to just about 35. A few months ago, the AUD had climbed all the way up to 44, but recenly took a real crash. Currently, the AUD is trading at about P32. It dropped from 44 to 32 in a matter of only around 4 months or so! Not good for the Aussies!
A few days ago, I went out for coffee with John Grant, and we discussed this matter. John was feeling down because the British Pound has also been taking quite a beating lately. Two years ago, the GBP was about P104, and had even hit P110 before that! However, from the P104 level, it took a slide down to about P79 in the first quarter of this year, before climbing it’s way back to around P90 in July/August of this year. From that point, though, the Pound has fallen like a rock (a pound of rocks?) and is now trading at around P73, it’s lowest exchange in the last 2 years that I investigated. Our British expat friends are hurting right now.
What about the Euro, the relatively new currency that our friends in much of Europe are using these days? Well, over the last few years the Euro has kind of been the “King of the Currencies” with it strengthening against almost every World Currency during this time. Two years ago, the Euro was worth 63 Pesos. It climbed from there, all the way up to 73 Pesos! But, 73 was the top of the exchange rate for the Euro. since that time, it has dropped against the Peso and today it is trading in the range of P61. That is quite a slide for our European friends.
What about our Canadian friends? I remember it was not long ago when the Canadian Dollar (CAD) was on parity, even a little higher than the USD. Times have changed a bit since then, though. Two years ago, the CAD was trading at P44, and over the past two years it climbed as high as P47. Lately, though, the CAD has been taking quite a hit and has been pretty volatile. Over the past week or two, the CAD has traded as low as P38. In the past week or so, it has gotten back up to about P41, though.
What about the United States Dollar? Well, as an American, I am happy to report that most American Expats that I know are very happy these days. Two years ago, the USD was trading at around P52, and it dropped like a rock from there. By January of this year (2008) the dollar was at P40, and the word the we were hearing and reading in the papers was that the dollar would be down to about P30 by 2010. Frankly, I was pretty worried about that, because at the P40 level, life was getting a little rough, given that the USD was at P56 just about 3 years ago. If the Dollar has slid down to P30, I would have had to figure out how to make more money, changed my lifestyle considerably, or left the Philippines. None of these were things I really wanted to do. Today, though, we are nearly back where we were 2 years ago, with the Dollar trading right around the p50 level again, in fact yesterday it broke P50:$1 for the first time during this cycle. Speculation is that the Peso will continue to slide against the Dollar for the forseeable future.
Having the Dollar trading at these levels again is a great feeling for Feyma and I, and for our American expat friends too. I must say, though, that I feel for my expat friends from other contries. I know how they feel, because, as Americans, we lost almost 1/3 of the value of our money against the Peso not too long ago, and I know that life became more difficult. I am lucky, because I make a pretty good income, so I know that if life was uncomfortable for me when the Dollar was so far down, some of my friends are really in bad shape with their currency down, because some of them also have very limited incomes in their home currency. I hope that their currencies stabilize and even gain some value soon.
In today’s trying times, we just don’t know what the financial markets will do in the coming months and years. Anything could happen, in my opinion. It’s a good time to put a nestegg aside, to cover your needs during trying times that we may see. It’s not a time to spend money wildly, that is for sure.
Good luck to everybody, I hope that your finances serve your needs.
Morning Bob,
Your are not wrong about the AUD. Not such a drama maybe if you are having a holiday but if you want to purchase a home then you are talking a diference potentially of tens of thousands of dollars, Ouch! You probably wouldn’t know but back when the AUD was floated in 1986 it collapsed to a low of only 56 American cents I think. Recently it climbed to 96 cents and is now back to around 66 cents. It is known as a bit of a yo-yo currency and it is heavily speculated (gambled) on by currency traders. Many times more AUD’s are traded than what is required simply for trade and hedging purposes. Back in ’86 it was jokingly referred to as the “PACIFIC PESO”! If it doesn’t improve soon, those of us with long memories may start referring to it as such again. Can the USD keep that strength in the medium term?? Maybe you ought to consider putting more dollars into pesos? Maybe into that bricks ‘n mortar project you were considering a few months back??
Yes, it’s tough certainly for some foreigners in the Philippines at the moment. I have lived in a number of countries and always lived by the maxim…earn pesos, spend pesos…other currencies should not really be relevant.
As an American living in the Phils. Bob, and for such a long time too, why does the dollar exchange rate affect you now? I know that for some reason you price your products in dollars, but since you live in the Phils., isn’t your income essentially in Pesos anyway.
Ian
Hi AussieLee- Hmm.. the Pacific Peso? I never heard that name before… I think that the USD should have been called that over the last couple of years! 😆
Hi Ian Hill- Why does the dollar exchange mean so much to me? I earn 95% of my income in US Dollars, and the other 5% of my income is in Euros. I earn no Pesos at all. I’ve been pretty clear and open about that in everything I’ve written here over the years. Perhaps you are a fairly new reader? All of my online earnings are in foreign currencies, and I earn 100% of my income online. So, indeed the exchange rate is very relevant to me.
When it comes to purchasing, I think in Pesos. I no longer convert in my head at all anymore.
Hi Bob- Since we are almost ready to get on the flight it is concerning how the exchange rates particularlly the pound £ has fallen in value not only against the peso but other major currencys as well.
I took a chance and converted enough £’s about two months ago when the £ was in the mid 80’s to the peso to last us about two years.
What goes round comes round and if you take the averages over the years we in the UK have done well in exchange rates despite everyone saying the £ was overvalued against the Euro and Dollar.
When you live on a tight budget governed by a fixed pension it can be difficult for people to make ends meet. Back here in the UK its ok for most who do not have to care about exchange rates apart from going on holiday overseas once a year.
Currently prices are dropping of all commodities as no one is buying anything other than food and essentials which has brought down inflation so the current situation has its advantages for some as well as disadvantiges for others. It seems as if the money market will never enjoy stability at any one time for us all to enjoy it together.
So much for the level playing field, its just a little more level for some than for others.
Regards.
Jim.
Hi Jim- I think that was a wise move to convert Pounds to Pesos, enough to last for about 2 years. It gives you a little play in each currency. If the Pound appreciates over time, during that 2 years, you can convert more to take advantage of strength over the short to mid term.
Hi Bob,Considering most of the West is in recession and most of their currencies doing badly, its a little baffling how the dollar is staying so strong,could it be the election effect,regards Chas.
Hi chasdv- The dollar picked up strength long before the election. It would seem that the old adage is coming into play – when times are uncertain, people fly to strength and certainty. The dollar is seen as fulfilling that. I don’t necessarily think it should anymore, but right now, that is what people are seeing in the dollar.
Hi Bob,
Kumusta na Bay? Nice article. Do you keep dollar account in Phil banks? If you do, how much interest rate can you earn from it? I know that peso account rates are relatively low these days, right? Thanks for the info.
Gerry Ilao
Hi Gerry- Maayo kaayo ko. Ikaw?
I do have a dollar account in a Philippine bank, but I don’t really have much money in it – as I recall, only a couple of hundred dollars. The interest rate is very low, maybe like 2% or something like that. I mostly keep my dollars in US accounts.
Maayo din (?)..(I grew up in Tacurong and is an Ilongggo town)
Wow.. 2% barely covers inflation… even US banks offer low interest these days… you will be lucky to find 4% one-year CD here in LA. I gues I’ll just put it under my mattress.
Also, just make sure that your deposit here in US banks are under the max threshold on 250K.
Correction:
Also, just make sure that your deposit here in US banks is under the max threshold amount of 250K for FDIC insured.
Hi Gerry- I am not familiar with “din” – I would say pud or sab instead, but I’m still just learning! 😆
Luckily (or unluckily) for me… I am well under the 250k threshold! 😉
Hi Bob. When we first arrived NZ and stayed there for 4 years, we saw the NZ dollar appreciate so high. It hurt us because we earn in US/CAD dollars and spending in NZ$. Kiwi businessmen, at least most of them, did not adjust their prices in accordance to their buying power – meaning they did not share the savings down to the buyers. Now, I see it back to the levels (maybe lower) we had when we first arrived. Foreign currency is risky business. It goes up and down. We have to remember that the higher it goes, the harder the fall.
Bob: in times of economic uncertainty, people tend to use dollars, hence the rise in the value. In business, Europe had gotten really expensive last year, especially the UK, and the strengthening has been a good thing for us, despite us being exporters. A lot of the dollar decline last year had to do with oil prices and since they are now dropping, the dollar increases. (Not as many going to saudi, etc.) I agree with you that the peso will probably continue to fall a little more and then level off, but really, it is anyone’s guess.
Interesting note… Our agent in Australia went from record high revenues in July to record lows in October. Most of his business is heavy industrial, rather than marine, and that sector in Australia has really been hammered the last couple of months.
Hi Ellen- I think that a lot of Americans learned the lesson of “the higher it goes, the harder it falls” over the last couple of years. Hopefully the worst has passed for us. I hope that our friends from other countries can recover too.
Hi John Miele- it really is anybody’s guess at this point. Hopefully, we can hit a period of more stability.
Industrial is taking a hammering the world over because if the consumers aren’t buying the salesmen aren’t buying so industry gets overstocked with product. 1929 again anyone? I think in the shorter term we are entering a deflationary depression cycle. Over the long term who knows. I really don’t like Obama’s energy policies as they could drive the price of oil up again and therefore kill the strengthening dollar. Now on to the dollar, I agree that the dollar is the world reserve currency and a combination of dollar buying / dissappearing credit has strengthened the dollar. How long this lasts is anyone’s guess especially since the central bank (FED) and congress don’t seem to want to exercise any financial responsibility…. they are being more cautious on how the bailout money is spent though which may mean a glimmer of hope in that department.
Hi Bob!
When I lived in Angeles City in ’95-’96 the exchange rate was at P25/$. That sounds low except that my expenses for one month was about $300. I rented a pretty nice house for P3000 (~$120). The rest went for food utilities and entertainment. When I was there in March I figured the same lifestyle would run about $1200. Even though the exchange rate is much higher; inflation has my the cost of living much more.
Could you imagine if the Rate was P25/$ now?! Yikes!!!
Mark.C
Hi BrSpiritus- Over the coming years, it makes me wonder what actions the Chinese will take, and what impact they will have. Hopefully the USA can wake up to it’s mistakes of the past and shift course.
Hi Mark C.- When I got married to Feyma in 1990, the exchange rate was P19:$1, so I know what you mean. Yeah, I hope we don’t see those low exchange levels again! 😆
Yup the £ peso drop has been a huge issue for me(25% drop in the last 6 months!!!) but what is even worse for me is that base rates in the UK have crashed and as i get my income from interest rates i have to have a rethink on being here in the Philippines. What a massive change in 6 months since i have been here, to the point now that the only way i can stay for the long term is to try and make pesos.
Problem with the UK is its going to get worse before it gets better.
But anyways i do what it takes to stay in the Philippines
Good news for you Yanks though 🙂 up to 50 pesos i think if it wasnt for still strong remitence it would be closer to 56. But i am expecting to see remitance to slow down so good news for $ holders. The £ could drop alot more as base rates wil be cut again in december in the UK
Hi Graham- We certainly live in interesting times, don’t we. Interesting is not always good, though.
There has been a slowdown in the percentage of increase on remittances, no doubt. I don’t know if we will see remittances actually decline, but slower growth was not expected just a few months ago even.
Good luck on your quest to start earning some pesos.
Anyone familiar with Gerald Celente? He just issued another trend alert last week. From what he’s saying, it looks like we’re in for a “very long cold winter”. Just wait and see what will happen after christmas and the inauguration.
I think for those who have the dollar or pound in the Philippines, it would be a good idea to convert it to peso while exchange rate is still high just like what Jim did.
JohnM is right. The dollar is tied in to the price of oil. Right now oil is low, so dollar is high but from the looks of the world economy, the strength of the dollar is temporary.
I think the reason for the flip flop is the political scenario here in the West but I’m not even going to go to politics right now.
Bottom line, I think that the haves and have nots are in for some major lifestyle adjustment unless you belong to the bracket of the “special haves” like Rockefeller, Rothschild, Queen Elizabeth, Warren Buffett, Paulson, Bernanke etc.
I hate to present a bleak picture but i think we better be prepared for what’s coming.
Gold anyone?
Hi Bob,
What has been discussed shows how corrupted the international financial system has become. Looking at the aussie dollar for example – I can’t see any rationale for it falling against the pesos or the US dollar. Australia is one of only two western countries still forecasting postive economic growth despite the financial crisis.
The international financial system needs a drastic overhaul to remove the opportunities for manipulation of exchange rates so that currency traders can make fortunes from the contrived fluctuations.
Maybe its time for a world currency now that the US dollar no longer will be stable or dominate international trade? Certainly the current system is not conducive to world economic growth and stability let alone the budgets of expats.
Hi Bob,
Further to my point .. a quote “A global economy requires a global currency.”
(Paul Volcker, former U.S. Federal Reserve Chair.)
The easiest to understand benefits of a Single Global Currency will be the elimination of $400 billion in annual foreign exchange costs, the elimination of foreign exchange fluctuations, and the elimination of the need of expensive foreign exchange reserves, now totaling more than $3 trillion around the world.
If the European Monetary Union can successfully provide a stable currency to 15 countries, why not a global currency managed by a Global Central Bank within a Global Monetary Union for all countries?
…. Not my thoughts but the thoughts of much greater minds.
Hi Beth- I believe, and have said for a couple of years that we are in for some difficult times ahead. I do not believe it is time to commit to the Peso, but diversification is a good thing. Just my opinion.
Hi Michael- The financial markets are certainly in turmoil. The react to so many different things that it is often difficult to figure out which way trends will go during volatile times like we are experiencing now.
I believe that something like a single world currency would be a very bad thing for expats like me, and others. For many, they moved to the Philippines because of the financial ability to play one set of economic rules against another. They earned money in one place, and spend it in another, taking advantage of the imbalance between the two. If you brought on a single world currency such imbalances would likely disappear, and advantages (financial advantages) of living in a place like the Philippines would likely disappear. Just my thoughts.
Beth you bring up a good point. Some of my money is in Silver and I want to get gold but I have no idea how to go about buying gold bullion here in the Pines. I will probably sink some of my Alaska money next year into gold but then it’s the idea of bringing it over here… I think it’s illegal to do so.
Hi BrSpiritus- Gold has lost about 20% of it’s value in the last month or two, so it is by no means a non-risk investment. But, for good info on gold investing, you might check both of these sites: e-gold.com and also egold.com
Yes I know gold has lost value… making it a “buy” opportunity now.
Hi BrSpiritus- I wish you the best of luck!
Hi BrSpiritus- Here is something that might interest you, check it out.
look at a gold ETF to buy and sell gold , its the easiest way and fastest way to buy and sell gold via the market.
If anyone can speak to it, please indicate the legality of bringing in gold, or silver (bullion in the form of coin) to the Philippines. A substantial portion of my portfolio is in physical gold/silver, and I would be curious to know the answer to this question.
Speaking of banking I am curios Bob if you have done any large (>$US 10K) transactions? We are going to look for a plot of land for a house in the next year or so and was thinking about how to pay for the land.
I was also curious if you keep the bulk of your money in dollars how do you access it for daily needs? Do you use an ATM?
Just some small questions for future reference…..
Hi Spencer- Sorry, that is something that I do not know.
Hi Dako- Yeah, I’ve done such large transactions. Within 2 weeks after moving here I bought a new car. It was about $16,000. I had a close friend who was a bank manager, though, and all I did was write a check on my US account to the bank, which he immediately converted to Pesos for me, and I paid cash for the car. So, this was a bit different than the norm. Having a bank manager as a close friend is a good thing, if you can do it.
On your other question… yes, I use the ATM machines for my daily money needs. I take the funds from my US account.
Hi Bob,Very turbolent times indeed.I think the only certainty is that Warren Buffet and George Soros will somehow make plenty out of the current global crisis.Regarding China they are heading for recession as less goods are being bought.However they have huge cash reserves,some which has been loaned to the US to help finance the US bail out.The Saudis, also cash rich, are lending to western countries also.Even the Russians have big economic problems now.We are all in this together,all nations will be effected.With regard to Michaels comment on a Global currency i think this will happen one day,but its a long way off,we won’t see it in our lifetime,regards Chas.
Hi chasdv- It is certainly the first economic downturn that we have experienced with the world so closely tied together, and that will make it interesting to see how everything flushes out.
Personally, I think that the Philippines is going to pass through this relatively well compared to many other economies.
Hi Bob,Yes you could be right about PI,due to tight banking regulations they had no exposure to the sub prime market,regards Chas.
Hi chasdv- The thing that will hurt the Philippines during the crisis is the exporting that the Philippines does to the rest of the world. This, however, is a small amount of exposure compared to what it could be.
Hi Bob
i can remember a time when the peso/dollar rate was under 10/1. Does that make me old?
Hi Dan Mihaliak- If the rate had stayed at P10:$1, it would have taken you a little longer to pay off that house! 😆
On Mike’s question about the AUD$. The Aussie is heavily reliant on metal ore prices. These went very high over the last 3 years and have plummeted by up to 75% in recent times due to reduced demand, mostly from China. If chinese growth continues to falter the Aussie will remain relatively weak.
Hi BrSpiritus,
I tried googling “where to buy gold bullion in the philippines” and this is one of the sites I found: http://au.answers.yahoo.com/question/index?qid=20080407223232AAbSqtv
In addition here is the bangko sentral link but I cannot find anything about gold bullion:
http://www.bsp.gov.ph/
Notice the exchange rate bulletin on the right hand side and you can compare it to this:
http://goldprice.org/
Here are 2 sites I’ve had dealings with:
http://nwtmint.com/
http://www.goldline.com/precious-metals/coin-prices.html
The first one offers lower premium than the second but their delivery time is longer.
I’m not sure about the legality of bringing the bullion to the Philippines. My guess is that if they are government-backed coins (not bars and not privately minted), they are considered legal tender so they would not have any problem going through customs esp if they’re less than $10K.. Again, this is just a guess on my part. I have not done a research on this one yet.
Hello Bob,
Do you know how Jim got 2 years worth of Peso’s into the country and staying under the $10,00.00 limit?
Interesting article that deserve to be revisited !!
It was written in 2008 but its still very relevant now.
A question for Bob
What do you see the US$/peso rate in the next 2 to 3 years ( 2015 to 2017 ) ?
Any website or blog that covers the trends of the Philippine peso ?
Hi David – I learned long ago that “predicting” what the currency markets will do is nothing but a guess. So, I don’t do that. Right now, the dollar is on an upward trend for the past months, but who knows if that will continue? I have seen articles in the news saying that certain economists think that the Peso is overvalued, so perhaps the good trend for the dollar will continue.
I know this probably is a stupid question. But I have to ask it.
Would there be any benefit to convert your home country’s currency to another currency that is trading higher against the Philippine Peso?
I know my thought would be that if your home country’s currency is flat against the Peso then it would probably be flat at the same rate against other country’s currencies. But not sure?
I have been watching the Peso a lot, almost every month for the last 7 years. Being that I do help support part of my family there. And I watch the fees at each transactions. I have moved away from using ATMs Cards and use companies to transfer money now. But even with those companies you have to look at your fees, and the exchange rates (what I see as the hidden fees)
But recently I found out that going with a different company I was able to save $15. $15 isn’t much but that may make a difference, I know it does for me.
Hi James – Generally, no, because there are costs to making the conversion and you won’t come out ahead. Also, it’s a gamble… it is kind of like if you asked “is it better for me to bet on the 49ers or the Cowboys?” Well, you just never know who will win, so no way to say which is best to bet on.. just like Foreign Exchange currency conversion! 🙂
If the exchange rate gets very favorable for the dollar, should we buy a lot of pesos and put them in a bank safety deposit box ? Retrieve them as needed. Sounds good, will it work ?
I would not do it personally, because there is no way to know if the dollar would continue to strengthen, in which case you would have made a bad buy.